Mitsui Fudosan Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.35T
• Operating Income: ¥218.78B
• Net Income: ¥87.15B
• EPS: ¥54.88

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Mitsui Fudosan (TSE:8801) delivered a strong FY2026 Q2 (JGAAP, consolidated) result with revenue of ¥1,353.4bn, up 16.4% YoY, and operating income of ¥218.8bn, up 29.1% YoY, indicating clear operating leverage. Net income rose 72.3% YoY to ¥152.2bn, lifting the net profit margin to 11.24% and reflecting both margin expansion and a favorable below-OP line versus the prior year. EBITDA reached ¥286.8bn, implying a 21.2% EBITDA margin and a 16.2% operating margin, both robust for a mixed leasing/development model. DuPont analysis shows ROE of 4.56% driven by an 11.24% net margin, 0.138x asset turnover, and 2.95x financial leverage; the modest ROE despite strong profit growth reflects the asset-heavy nature of the business. Ordinary income of ¥183.6bn was below operating income, consistent with meaningful interest expense (¥40.1bn) and other non-operating effects typical in real estate; even so, interest coverage of 5.5x indicates comfortable servicing of debt at current earnings power. The balance sheet remains sizable with total assets of ¥9.84tn and equity of ¥3.34tn (implying an equity ratio around the low-30% range based on available figures), alongside liabilities of ¥6.59tn. Liquidity appears solid with current assets of ¥3.17tn versus current liabilities of ¥1.85tn (current ratio 171%), underpinned by substantial working capital of ¥1.32tn. Operating cash flow was negative at -¥32.1bn, a common pattern for developers during periods of inventory/project buildup or leasing investment; financing cash flow was positive at ¥294.3bn, consistent with active funding of growth. Reported effective tax rate and several line items (e.g., COGS, gross profit, investing cash flow, cash and equivalents, inventories, DPS) are unreported in the dataset, so conclusions rely on the disclosed non-zero items. Despite these disclosure gaps, the trends in revenue, operating income, net income, and leverage/coverage metrics indicate improved profitability and resilient financial capacity. The rise in operating income outpacing revenue suggests cost discipline and favorable project mix, while net income benefited further from below-OP items relative to prior year comparatives. Asset turnover at 0.138x remains structurally low versus non-asset-heavy sectors but is typical for a prime Japanese developer with large investment property holdings. Debt-to-equity at 1.97x reflects meaningful, but industry-typical, leverage used to fund development and investment pipelines. With large-scale urban redevelopment and a diversified leasing platform likely underpinning medium-term earnings, the momentum into the second half appears constructive, subject to execution and market conditions. Overall, Mitsui Fudosan’s FY2026 Q2 shows healthy top-line growth, margin expansion, sound coverage, and adequate liquidity, balanced by negative OCF this period and the inherent cyclicality and rate sensitivity of the sector.

Profitability Analysis

ROE (4.56%) decomposes into: net profit margin 11.24% × asset turnover 0.138 × financial leverage 2.95. The improvement in operating income (+29.1% YoY) versus revenue (+16.4% YoY) demonstrates positive operating leverage, translating to an operating margin of roughly 16.2% and EBITDA margin of 21.2%. Ordinary income of ¥183.6bn sits below operating income due to net non-operating costs (notably ¥40.1bn interest), but interest coverage is a comfortable 5.5x, supporting margin resilience. Net margin of 11.24% is strong for a developer, aided by a favorable mix and scale benefits. Gross profit and COGS are unreported, but the EBITDA/OP bridge (D&A ~¥68.0bn) is consistent with a capital-intensive leasing base. Margin quality appears supported by recurring leasing cash earnings (proxied by EBITDA) and successful project deliveries, though full validation requires segment detail not provided here. The subdued ROE versus margin strength is structural, given low asset turnover in an asset-heavy model; sustaining ROE improvement would require continued margin gains and/or asset recycling to enhance turnover. Below-OP items (interest and others) remain a drag versus OP, but the company has ample cushion at current profitability levels.

Growth Assessment

Revenue rose 16.4% YoY to ¥1,353.4bn, with operating income up 29.1% and net income up 72.3%, indicating expansion in both core and bottom-line profitability. The acceleration at the operating level points to a favorable project timing/mix and cost control, while the step-up in net income suggests improved below-OP factors versus the prior year. Sustainability hinges on the development pipeline execution and leasing absorption/rent trends; given the company’s scale and urban redevelopment exposure, medium-term visibility is typically stronger than peers, though exact segment contributions are not disclosed here. Asset turnover at 0.138x is consistent with a large investment property base; growth is thus more margin- and pipeline-driven than turnover-driven. Interest expense at ¥40.1bn is material; maintaining growth against a higher-rate backdrop will depend on rent reversion, stable cap rates, and continued funding access. With OCF negative this half, growth is being funded by balance sheet and financing inflows, which is typical in active development phases but raises dependence on capital markets. Near-term outlook appears constructive given H1 momentum, but is sensitive to project delivery schedules, residential/investor sales timing, and hotel/retail recovery trajectories. Lack of segment/contract backlog disclosure in this dataset limits precision on the sustainability split between recurring (leasing/management) and transactional (for-sale) earnings.

Financial Health

Total assets ¥9.84tn, equity ¥3.34tn, liabilities ¥6.59tn imply an equity ratio in the low 30% range and financial leverage of 2.95x (assets/equity). Debt-to-equity is 1.97x, indicating meaningful leverage typical of developers with large investment property portfolios. Liquidity appears adequate with current assets ¥3.17tn versus current liabilities ¥1.85tn (current ratio 171%, quick ratio shown equal due to unreported inventories). Working capital is sizeable at ¥1.32tn, providing a buffer for near-term obligations and project expenditures. Interest coverage at 5.5x signals healthy capacity to service debt from operating earnings. Ordinary income below operating income indicates net non-operating costs, but the gap is manageable at current profitability. While the reported equity ratio is shown as 0.0% in the dataset, that is an unreported metric; using available figures, balance sheet strength appears consistent with a high-grade developer profile. Solvency remains reliant on stable rental cash flows and timely asset sales; absent detailed debt maturity ladders and cash balances (unreported), we infer adequate but not excess liquidity given the funding intensity of the model.

Cash Flow Quality

Operating cash flow of -¥32.1bn versus net income of ¥152.2bn yields an OCF/NI ratio of -0.21, indicating weak cash conversion in the half, likely due to working capital consumption (land acquisition, construction in progress, deposits) typical in active development periods. EBITDA of ¥286.8bn supports the earnings quality of the leasing base, but cash realization is timing-dependent on project completions and collections. Investing cash flow is unreported; in this sector it is typically significant (property acquisitions, capex), so true free cash flow cannot be reliably computed from the dataset. Financing cash flow of +¥294.3bn indicates external funding of growth and working capital needs, consistent with sector practice. Working capital rose (given negative OCF), which, while a headwind to cash, can seed future revenue as projects progress. Given these factors, cash flow quality is acceptable for a developer in expansion mode but exhibits timing volatility; clarity would improve with disclosed inventories, contract liabilities, and investing flows.

Dividend Sustainability

Dividend data (DPS and payout ratio) are unreported here; annual DPS is shown as ¥0.00 and payout as 0.0%, which should be treated as missing rather than actual. Without DPS or comprehensive free cash flow, we cannot calculate payout coverage. From an earnings perspective, net income is strong and leverage/coverage are manageable, suggesting capacity, but sustainability assessments hinge on the cadence of OCF and capex/investment plans. Historically, large Japanese developers balance growth investment with stable dividends, but confirmation requires the company’s stated policy and guidance, which are not provided in this dataset. FCF coverage is shown as 0.00x (unreported), so no conclusion can be drawn on coverage quality for the period.

Risk Assessment

Business Risks:

• Project timing risk: earnings depend on completion/sale schedules for development projects.
• Leasing market risk: rent levels, occupancy, and tenant retention, especially in office/retail.
• Residential and investor sales cyclicality: exposure to mortgage conditions and buyer sentiment.
• Construction cost inflation and supply-chain delays affecting margins and timelines.
• Asset valuation risk amid interest-rate/cap-rate shifts impacting NAV and gains on sales.
• Hotel/tourism recovery uncertainty affecting hospitality earnings mix.

Financial Risks:

• Interest-rate risk: ¥40.1bn interest expense and D/E of 1.97x heighten sensitivity to rate moves.
• Refinancing and liquidity risk given funding intensity and negative OCF this half.
• Working capital volatility inherent in development cycles impacting cash conversion.
• Potential covenant or rating pressure if market conditions deteriorate and EBITDA falls.
• Foreign exchange and cross-border portfolio exposures (if any) affecting funding and asset values.

Key Concerns:

• Negative operating cash flow (-¥32.1bn) versus positive earnings, indicating timing/working capital drag.
• Ordinary income below operating income due to net non-operating costs, primarily interest.
• Data gaps (COGS, gross profit, inventories, investing CF, cash, DPS) limit precision of analysis.

Investment Implications

Key Takeaways:

• Strong H1 momentum: revenue +16.4% YoY, OP +29.1% YoY, NI +72.3% YoY.
• Margin expansion with OP margin ~16.2% and EBITDA margin 21.2%.
• ROE at 4.56% reflects high margins but low asset turnover in an asset-heavy model.
• Comfortable interest coverage (5.5x) despite meaningful interest expense (¥40.1bn).
• Adequate liquidity: current ratio 171% and ¥1.32tn working capital.
• Negative OCF (-¥32.1bn) underscores cash timing and investment cycle effects.
• Leverage (D/E 1.97x) is material but in line with sector norms.

Metrics to Watch:

• Segment-level OP and margins (leasing vs. property sales) to gauge sustainability.
• OCF and investing CF trends; inventory/land bank movements and pre-sales/contract liabilities.
• Debt maturity profile, average funding cost, and interest-rate sensitivity.
• Occupancy rates, rent reversion, and pipeline delivery milestones.
• Asset recycling proceeds and capex plans affecting asset turnover and leverage.
• Tax rate normalization and minority interest effects on bottom line.

Relative Positioning: Within Japan’s large-cap developers, Mitsui Fudosan typically benefits from scale, prime urban assets, and a deep redevelopment pipeline, supporting above-peer earnings resilience; however, like peers, it remains exposed to rate cycles, project timing, and cash flow volatility inherent in asset-heavy models.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis